Retail Industry: The Purchase Power of Generation Y
By Ann Sosnowski
In this article
Since Easter shopping was a little earlier this year, Wal-Mart Stores Inc. (WMT:NYSE) showed great March same-store sales on apparel and groceries.
Tweens, mostly girls between the ages of 7 and 13, have extremely high purchase power in Generation Y.
Tween Brands Inc. (TWB:NYSE) caters to this demographic, which spent $11.5 billion on apparel in 2006 alone.
Retail Industry: The Purchase Power of Generation Y
The decline in retail is extremely exaggerated. Whether you experience it firsthand or secondhand.
I went to the mall on Saturday, just to walk around and see what people were buying. Restoration Hardware and the Apple store were pretty dead… but major department stores like Macy's, JC Penney and Nordstrom were swamped… with teenagers.
It is, after all, prom dress-shopping season.
And by the looks of the prices on those princess dresses, the lines at the dressing rooms, and the high-end credit cards that parents were pulling out at the cash register, it's going to be a good spring season for major retailers.
Put together the fact that Easter weekend came earlier this year, and most major retailers look like they'll be pulling in some major dough.
Wal-Mart Stores Inc. (WMT:NYSE) is already reporting that it saw a 4% sales increase in March. Interestingly enough, grocery sales pushed WMT up to its same-store sales increase.
WMT has announced that April sales may be “tepid.” Even though folks love to hate WMT, personally, I think this is a way for WMT to take advantage of a situation that will be much better. Although most Easter sales occurred in March this year, sales are expected to be flat up to 2%. But don't forget it's still April… tax refund, anyone?
In addition to grocery sales, girls' wear and spring apparel also increased sales.
Retail Industry: Girls (With the Help of Their Parents) Spent $11.5 Billion in 2006
Girls, specifically “tween” girls (ages 7 to 13), are one of the most marketed-to groups in retail these days. Tweens encompass the most important generation to retailers and marketers -- Generation Y, ages 8 to 26. The other most marketed-to group is, of course, the baby boomer generation.
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This is obvious. You have young children whose parents, in this day and age, will buy anything they point to or cause a tantrum over… and older adults, with empty nests, who are starting to buy themselves luxury items, new cars and retirement homes.
According to the NPD Group, 7-14-year-old girls spent $11.5 billion on apparel in 2006 (or rather their parents did), showing an increase of 9.52% over 2005.
Tween girls are extremely fashionable. Often they get in fights with their parents over clothing choices, as the parents are trying to keep their girls looking their age, while the tweens want to emulate their favorite fashion idols, like Britney Spears and Christina Aguilera.
One specific company, Tween Brands Inc. (TWB:NYSE), may be worth looking at if you're interested in playing specialty retail, especially since the market for its clothing and accessories is established and growing.
Retail Industry: Tween Brands Offers a Buying Opportunity
TWB runs Limited Too and Justice brand-name shops. It operates 563 Limited Too storefronts in America and Puerto Rico, and 159 Justice storefronts in the United States.
In its fourth-quarter earnings release, TWB reported a 4% gain in profit. The stock is still considered “outperform” in its industry.
TWB underwent a double-top formation of roughly $44.50 in early December 2006. TWB confirmed the double top by dropping below its middle valley in one quick gap down in price. The normal correction for this kind of “Adam” and “Adam” double top is 18%.
TWB retraced 24% from its double top, and 18.28% from its peak! Currently, the stock is rising slowly along its bottom rising trend from August 2004. Since the stock has already corrected, it's solid for another run up.
From its current price of $37.14 per share, even a rise up to its most recent high of $44.50 per share could give you a gain of 20% in the next three months.
I'm considering this a free Market Report recommendation. If you're interested in playing specialty retail on a growing segment of tween shoppers (and their parents!), pick up shares of Tween Brands Inc. (TWB:NYSE) at its current price.
If my trip to the mall is any indication of the buying power of the tween portion of Generation Y, then we're in for a great gain.
***
Ann Sosnowski is a small and mid-cap stock analyst for Taipan Financial News. She is the editor of Diligent Investor, a monthly newsletter that balances conservative and moderately risky investments that pertain to current market trends. She is also the editor of Diligent Investor Micro-Cap Hot Sheet, a monthly newsletter that finds the hottest penny and micro-cap stocks on the market.
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Related Resources
Retail Industry: A sales slowdown in April? - Business Week
Retail Industry: Tween Brands' official website.
Retail Industry: The purchasing power of the Tween generation. - USA Today